VAT on the Sale of Goods
VAT applies to the “supply of for monies or other value” of goods or services by taxable persons within the State. Taxable persons are persons who are or should be registered for VAT. VAT is also chargeable in respect of the import of goods and the acquisition of goods and services by certain persons from within the EU.
A distinction is made between the import of goods from outside the European Union and the acquisition of goods from within the European Union. See our separate chapters in relation to these separate categories of transactions.
The supply of goods generally involves the transfer of ownership of goods. Certain other transactions are deemed VATable even though they do not technically comprise a transfer of ownership. This includes hire purchase in credit sale transactions, transfers of goods within the EU without a change of ownership, the processing of goods supplied by a third party a so-called self-supply where goods are transferred from use in a VAT registered business to a non-VAT registered business.
Supplies to other EU States
The supply of goods to or from another EU country is dealt with differently to supplies from in and outside the European Union.
The charge to VAT depends on the place where the supply is made. For example, Irish VAT applies to supplies made within the State. There are corresponding provisions in the other EU states.
The basic rule is that the supply of goods takes place where the goods are dispatched from. There are exceptions to this general rule, some of which are set out below.
Exceptions to Place of VAT LIability
Goods which are installed and assembled are deemed to be supplied where the installation or assembly takes place. Similarly, goods which are incorporated in a building are deemed to be supplied where the building is situated.
If goods are not transported they are deemed supplied where they are physically situated at the time of sale. This would happen with many retail purchases which are physical sales or sales which are done by a registered business within one EU state to non-registered (mainly private persons) in another state.
Where a business makes supplies in another EU state, it must register in that other state once they exceed the distance selling thresholds for that state. They may elect to do so below this threshold.
In these cases, the distant sale is deemed to take place where the goods are dispatched to (so that they are deemed supplied within the purchaser’s state) so that they are subject to VAT there. Where the sales are under the threshold the normal rules apply and VAT is charged in the supplier’s state.
Where a business acquires goods cross the border from another EU state there is deemed to be a so-called community acquisition for the supplier in the other EU state. The supply takes place in that latter state so that the acquirer can simultaneously recover VAT on his i3mport.
There is no supply and therefore no VAT is the state of dispatch. The supplier must give a declaration of the supply in his EIS statistical return.
The importer (called an acquirer) in the other EU state he must account for the VAT. He must also need to his file his own Intrastat return where his intra EU acquisitions exceed the applicable turnover threshold.
EU Transfer Issues
Technically an intra-EU acquisition is deemed to take place in the EU state to which the goods are dispatched. There are less obvious implications. If an importer in the UK imports from an exporter in France and directs that the goods be transported to Ireland then the place of supply is Ireland. The importer may have to register for VAT in Ireland if the supplies exceed the requisite turnover trestle for intra-EU acquisition i.e. purchases from other EU states.
A business or company may transfer goods from one branch in another EU state to a branch in Ireland. This constitutes an intra-EU acquisition even though there is no change in ownership of the property. Because there is an acquisition from another EU state then subject to the thresholds for registration, the acquirer may have to register in Ireland if it is not already so registered and would have to account for VAT on the acquisition.
Where multiple states are involved, simplification measures may apply. If an Irish based company acquires goods in one member state and directs that it be delivered to its customer in another member state simplification measures may be available.
In the absence of the simplification measures, the Irish company would have to register in the state where the goods are transported to. Where the simplification measures apply the recipient in the state of receipt accounts for VAT and the Irish company notes the transaction on its VIES return. Conditions are acquired in terms of invoicing.
An acquisition from another EU state is deemed to take place in the state where the VAT number of the acquirer issued. This can mean that two acquisitions can be deemed take place, one where the goods are physically transported to and one where the acquiring company is established. Triangulation simplifies the multiple acquisition rules.
Proof of Dispatch to EU
Where an Irish established business supplies goods to a business established in another EU state and obtains the customer’s VAT number then the general rule is that the sale is treated as if it is zero-rated. The Irish company may recover VAT in respect of the input. The matter of VAT accounting is then a matter for the acquiring company in its state.
The Irish business must ensure that it obtains proof of the transportation of the goods and verifies and proves the customer’s VAT registration status and number. The VAT number must be set out in the invoice. Unless the requisite proof is obtained VAT must be charged.
Proof of transport is generally be undertaken by way of delivery dockets, bills of lading, airway bills, etc.
There are mechanisms for vouching for the validity of EU VAT numbers. The Revenue Commissioners operate a facility by which EU numbers can be verified by contacting Revenue or online.
When goods are sent from an Irish branch to a foreign branch of the same company, there is deemed to be a zero rate supply. The company must register for VAT in the state of acquisition and account for it by way of reverse charge.
There are certain exemptions from the above treatment in respect of goods which are temporarily exported.
Exports to outside the EU
There is a scheme by which visitors to the State from outside the EU may reclaim VAT. This is equivalent to an export. The scheme also applies to persons intending to reside outside the EU for a period of at least one year. The goods must be exported outside the EU within three months of purchase. Proof of removal must be retained. If the purchaser is a traveller, the supplier must take steps to confirm that he is so.
Under the scheme, the retailer can charge and refund VAT to the customer when it receives proof of export. Alternatively, the retailer may sell the goods VAT free. However, if proof of export is not furnished VAT must be repaid. Proof of export would normally require customs stamp or equivalent.
VAT on Imports
The rate of VAT on imports depends on the general rate applicable under domestic VAT rules. The goods are valued in the same manner in which they are valued for customs. This means that the cost of import is itself included. Carriage insurance and freight are added. Customs and equivalent duties [are added].
Imported goods must be cleared through customs. See the separate section on customs procedures trade. The automatic entry processing system allows electronic customs declarations to be used.
The general rule is that VAT must be accounted for at the time of importation. If the importer is a business and the purchase is for the purpose of making vatable supplies, the VAT may be recovered through the VAT return in the normal manner, in due course.
Deferred Payment Schemes
The deferred payment arrangement requires a bank guarantee. Payment of customs duties and VAT are deferred until the 15th day of the month in which the VAT becomes due. The same general principles apply in respect of a customs duties. See the section on customs and imports.
Several of the general schemes of relief that apply in respect of customs and goods also apply in respect of VAT. See the section on customs duty and VAT. Some of the reliefs are temporary and all are conditional. VAT may be suspended where goods are brought to custom warehouses. The VAT is suspended until the goods are released from the warehouses.There are various regimes which permit processing to take place free of VAT and customs duty. The duty may be suspended until the processing is completed.